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China’s scientific collaboration with other countries has declined since the pandemic, driven by falling partnerships with the United States, an analysis shows.

Scientists have been warning that political tensions between China and the United States, combined with the pandemic, have affected research collaborations between the two countries. But it takes time for evidence of this sort of decline to accumulate in research databases.

The latest evidence comes from an analysis conducted by Springer Nature’s team in China. (Nature’s news team is editorially independent of its publisher, Springer Nature.) The authors used InCites, a tool owned by publishing-analytics firm Clarivate, based in London, to analyse internationally co-authored articles that were published between 2013 and 2023. InCites draws on papers indexed in the science-citation database Web of Science.

They found that in 2022, the total number papers co-authored by researchers from China and their international peers declined for the first time since 2013 (See 'Research Powerhouse').

The proportion of research papers with Chinese and international co-authors has been falling for even longer. At its peak, in 2018, 26.6% — roughly 110,000 articles — of China’s output in the InCites database was co-authored with international colleagues. By 2023, the proportion of the country’s articles with international peers had dropped by 7.2%, despite China’s overall number of articles almost doubling to 759,000 over the same period.

The drop in internationally co-authored papers is mainly due to China’s declining share of papers published with US researchers, which fell by 6.4% between its peak in 2017 and 2023 — the largest decline of any country included in the analysis. The findings were presented at the Zhongguancun Forum in Beijing on 25 April.

The decline in US-China collaborations echoes findings from a 2022 analysis conducted for Nature, which found that the number of researchers with dual US and China affiliations on research articles in Elsevier’s Scopus database had fallen by more than 20% between 2019 and 2021.

Although the latest analysis shows that the share of US–China articles has been slowly declining over the past six years, the pandemic exacerbated the downward trend, says Marina Zhang, an innovation researcher who focuses on China at the University of Technology Sydney in Australia.

Political tensions

Zhang says that ongoing geopolitical tensions between the United States and China have also fuelled the decline. “This is especially worrying for researchers,” says Zhang. The US Department of Justice’s controversial China Initiative — which was launched in 2018 to tackle espionage in research and industry — ended in 2022. The crackdown resulted in several scientists being arrested over their ties to collaborators or institutions in China, and has stoked fear among researchers of Chinese descent. Since then, the US government has adopted a range of policies focused on tightening research security. And in July 2023, the Chinese government implemented its revised counter-espionage law, which broadened the definition of what constitutes spying.

The crackdown on perceived foreign interference in both the United States and China is making researchers more cautious about collaborating, says Zhang. Restrictive policies and the climate of fear could end up driving talent away from certain countries and fields, leading to a “brain drain and a loss of valuable human capital”, she says.

This “chilling effect” on US–China collaborations is already hindering influential research, says Tang Li, a researcher who specializes in science and innovation policy at Fudan University in Shanghai, China. For instance, a 2024 study examined the effect that the foreign-interference investigations at the US National Institutes of Health (NIH) had on researchers and found that those in the United States with collaborators in China were less productive during this period than were their colleagues with scientific partners in other countries1.

Zhang says that the faltering collaborative ties between the United States and China could also result in the countries pursuing the same types of research separately, instead of joining forces to tackle global problems such as climate change, pandemics and food security.

Turning inwards

More worryingly, the countries might increasingly prioritize domestic interests over international cooperation, which could make scientific research a more nationalistic endeavour, says Zhang.

China’s collaborations with other countries have also tapered off since 2020, but not as markedly as those with the United States. Tang says that reviving US–China collaborations is crucial because such scientific partnerships could help to bridge the gap between the two countries. “Given the increasing global disasters and uncertainties, humanity cannot afford to waste time on nationalistic rivalries,” she says.

How did the Democrats lose Silicon Valley? Or did they?

If you read the headlines this week about Elon Musk, David Sacks, Marc Andreessen and other influential figures in technology moving to support former President Trump’s re-election, it appeared a sea change had taken place in Silicon Valley, long considered a Democrat hotbed.

The loudest donors in Silicon Valley are promoting Trump at a time when the tech world as a whole is ascending in Washington, with billionaires using their ballooning wealth and media foothold to exert influence. Their voices are made all the more prominent amid the conspicuous neutrality of Big Tech leaders like the Google C.E.O. Sundar Pichai and the Meta chief Mark Zuckerberg, who are possibly afraid of invoking Trump’s ire and employee backlash.

It wasn’t always this way. But big technology’s relationship with government, once symbiotic, attracted new scrutiny from Silicon Valley’s libertarian masses after social media companies tamped down on misinformation, drawing accusations that they were ceding to an overstepping government.

For some, the infractions were more personal. Musk was brushed off by President Biden over his anti-union stance and excluded from an electric vehicle event at the White House in 2021. Now Musk, who has voted for Democrats in the past and has said he created Tesla to help one of Biden’s biggest ambitions, preventing climate change, has become among the party’s biggest detractors.

Then there are issues in California, like rising taxes and a crime wave in San Francisco; the anti-woke movement; and regulatory battles over antitrust, crypto, and artificial intelligence that have high stakes in Silicon Valley.

The question now is whether Silicon Valley’s Trump boosters are heralding a larger shift in the tech world, or if they’re merely demonstrating that their voices are more powerful in politics than ever.

Silicon Valley’s iconoclastic views run deep. Peter Thiel and David Sacks, two of Trump’s biggest supporters in tech, co-authored “The Diversity Myth” in 1995, arguing against “the extreme focus on racism.” At the time it was a fringe view in politics, and tech was a relatively small industry.

But the Republican Party now reflects some of the tech industry’s long-held libertarian views, making fighting “woke equity” a pillar of its politics, while Democrats, including Gov. Gavin Newsom of California, have pushed for laws promoting diversity.

At the same time, tech’s influence in politics has skyrocketed. While Thiel’s $1.6 million check to Trump drew headlines in 2016, it looks like chump change compared to Musk’s recently reported pledge to donate $45 million a month to a pro-Trump super PAC. Venture capitalists have built up huge followings on podcasts, newsletters and on X, which is owned by Musk.

Tech is tired of being cast as the villain. As founders became billionaires, the industry became, in its view, a punching bag for regulators. Senator Elizabeth Warren has led a charge against cryptocurrency. Biden’s top antitrust enforcers — Lina Kahn of the Federal Trade Commission and Jonathan Kanter at the Department of Justice — have zeroed in on tech acquisitions, limiting venture capital firms’ ability to sell a company.

But at the Republican National Convention this week, Wall Street, not technology, was the target of choice.

Jason Calacanis, who hosts a popular podcast with fellow Trump supporters and start-up investors Chamath Palihapitiya, Sacks and David Friedberg, wrote in a post on X during the convention: “The truth is, the left has dug into an anti-entrepreneur and anti-tech position for over a decade, while the GOP has positioned Trump 2.0 to be pro-innovation and pro-founder.”

Crypto is chief on the agenda. The crypto industry has already spent millions attacking Representative Katie Porter of California, a crypto critic, and in tight elections in Ohio and Montana. It’s expected to spend millions more on the presidential race. Marc Andreessen and Ben Horowitz, whose venture capital firm has bet big on crypto, told employees this week the Biden administration has “basically subverted rule of law to attack crypto industry,” as they disclosed plans to put their money behind Trump. (The venture capitalist Mark Cuban has speculated investors might see a further benefit in supporting Trump’s likely inflationary agenda.)

“Their mortal enemy is Gary Gensler at the S.E.C.,” said Boris Feldman, the head of the technology, media and telecom practice at the law firm Freshfields, referring to the chair of the securities regulator. “If you’re a billionaire, what is it to you to give $100 million if you think that will save your business?”

They don’t see risk in publicly backing Trump. While Biden has spoken harshly about “corporate greed,” Trump has a history of lashing out at specific companies. Many of Trump’s loudest supporters in tech, including Musk, endorsed him after he survived an assassination attempt at a campaign rally, which seemed an immediate boon for his campaign.

“If they have taken such a large, huge public stance against Biden at this point, they obviously think one of two things is true, maybe both,” Julie Samuels, chief executive of TechNYC, a nonprofit industry group, told DealBook. “One, there’s literally no chance he can win. Or number two, even if he wins, it can’t get any worse for them than it is right now.”

The bigger picture of Silicon Valley looks less red. The vast majority of tech companies’ rank and file, as well as power brokers, still vote Democrat. A poll by The Information, a technology focused publication, found a majority of its readers plan to vote for Biden. Reid Hoffman, LinkedIn’s co-founder, is one of Biden’s most influential supporters. Mark Pincus, the former C.E.O. of Zynga, said this week he originally supported Biden in this election because he “thought that a second Trump presidency is risky.” He noted, among other things, Trump “has been oddly positive about dictators like Vladimir Putin.” (Pincus, who bemoaned the Democrats’ progressive policies, also urged Biden to move aside for another Democratic candidate.)

Vinod Khosla, founder of Khosla Ventures who hosted a fundraiser for Biden in May, told DealBook that he thinks the perception of Silicon Valley’s politics has been skewed by a handful of people whose calculus is: “‘anyone supporting crypto,’ ‘less regulation makes me more money,’ and ‘Trump opinions can be bought.’”

“VC’s who have a large megaphone should not be confused as representing all of Silicon Valley,” Khosla said. — Lauren Hirsch

The credit world’s version of the “Trump trade” is beginning to take shape: Buy American high-yield bonds and steer clear of anything inflation-sensitive.

Corporate bond investors around the world have already started positioning to benefit from a potential Donald Trump election victory after an assassination attempt and the Republican National Convention boosted his position in polls. Spreads on US high-yield bonds strengthened compared with their euro counterparts in the past week and junk funds globally saw a surge in inflows.

“US high yield is the trade,” said Al Cattermole, a portfolio manager at Mirabaud Asset Management. “It is more domestic-focused and exposed to US economic activity.”

In a late June interview with Bloomberg Businessweek, Trump said he wants to bring the corporate tax rate down to as low as 15%. That lower expense could improve the creditworthiness of weaker firms. US companies could also benefit from protectionist policies that will see high tariffs slapped on imports if the Republican nominee is victorious.

US junk is attractive to money managers because, when financials are excluded, more than half of top junk-rated borrowers only have domestic revenues, according to a Bloomberg News analysis. That compares with just a fifth in the high-grade space. The data excludes companies that don’t publicly disclose the information.

Domestic manufacturers could also benefit from tariffs and looser regulation.

“We have been adding US industrials that would benefit from a pro-business stance from a new government,” said Catherine Braganza, senior high yield portfolio manager at Insight Investment. “Companies that benefit from industrial manufacturing, in particular, those that deal with spare parts” are attractive, she said.

Yield Curve

Some fund managers are instead focusing on the shape of the yield curve, particularly as corporate bond spreads seem to have little room to fall further after nearing their tightest level in more than two years.

“We have reduced duration by having shorter-dated bonds, using futures and also using steepener trades,” said Gabriele Foa, a portfolio manager at Algebris Investments’ global credit team, referring to wagers that benefit when the gap between short- and long-dated yields widens.

Even though this spread has widened this year, it remains far below levels seen before major central banks started raising interest rates to tackle runaway inflation. At the moment, bondholders receive a measly 30 basis points in extra yield by holding seven- to 10-year global corporate bonds instead of shorter-term company notes, according to Bloomberg indexes, compared with 110 just before Trump left office in 2021.

his gives the curve further room to steepen, particularly if the former President’s policies — which are expected to be inflationary and lead to higher national debt — are matched by interest-rate cuts by the Federal Reserve.

To be sure, not all money managers are switching to a Trump portfolio just yet. It’s not yet a sure thing that he will win, and even if he does, it’s not completely clear what he will do in office.

“It’s a bit too early to adjust your portfolio based on ‘what ifs’ when Donald Trump is in office,” said Joost de Graaf, co-head of the credit team at Van Lanschot Kempen Investment Management. “We still expect to see a bit of summer grind tighter in spreads.”

If Trump does win, markets sensitive to higher interest rates, inflation and tariffs are expected to be more unpredictable.

“Higher for longer is bad for emerging markets, and you’ll get weaker economic growth due to tariffs,” said Mirabaud’s Cattermole. “We would expect that European high yield underperforms in the next nine months.”

If you pick a famous European city for your summer vacation, you’re likely signing up for congested airports, attractions, and TikTok-famous restaurants.

You probably also have to snap up your holiday rental before one of the hundred others eyeing it doesn’t beat you to it.

That’s a sign you’ve encountered an effect of overtourism.

Travel is a phenomenon as old as time. Historically, it was seen as a positive experience where visitors engaged with a country’s culture and boosted the local economy by supporting businesses. It was seen as a rare, once-in-a-lifetime opportunity that often took months of planning. Lately, however, travel has become easy and affordable—and that’s tipped the scales towards overtourism, changing people’s experience for the worse and degrading residents’ quality of life.

Anti-tourism protests in Europe started in the 1990s with “touristification” of culturally significant places. In recent months, authorities and locals have become noticeably bitter about the uptick in visitors. In Barcelona, protesters sprayed water and screamed “go home” at tourists earlier this month, highlighting how the tourism industry’s impact often overflows into residents’ lives. The Spanish city welcomed nearly 26 million visitors last year—roughly 16 times its population of 1.6 million.

Protestors in Mallorca in May called for a more sustainable form of tourism that prioritizes locals’ ability to buy property and imposes controls on holiday stays. Such protests could spread further, a top UNESCO official warned, if the right action isn’t taken to nip the problem.

“Tourism is dying of success in some of the destinations. No famous destination that [is] overcrowded has found the formula to avoid this phenomenon of overtourism,” said Manuel Alector Ribeiro, an associate professor in tourism management at the University of Surrey. He thinks there’s a lack of management as “tourism is supposed to be an industry or sector for social good,” instead, it’s breeding hostility between residents and tourists.

Cities have tried to tread lightly, given their complicated relationship with tourism. On the one hand, it’s a significant revenue contributor to local finances. For instance, travel and tourism directly contributed to 7.7% of Venice’s GDP in 2022, according to the World Travel & Tourism Council. On the other, the visitor boom has made housing exorbitant, with more places catering to short-term stays over long-term rentals, ultimately pricing locals out.

People’s attitudes towards tourism have also changed with time. A majority of Barcelona residents don’t see tourism as much of an economic driver as they did before and think the city has reached its limit, a 2023 city council survey revealed. The report also found that locals resist cheap tourism which makes travel more attractive—but at what cost?

How did we end up here?

Mass tourism has been building up for a while now. A confluence of post-pandemic travel demand, strong U.S. dollar against the euro, and higher disposable income in countries like India and China have contributed to it. But at the center of it is the access to affordable flights, Boston Consulting Group’s managing director and partner Yassin El Khourouj told Fortune.

“The rise of low-cost airlines has allowed the development of cheap city breaks and short trips. In parallel, in most cases, overtourism has yet to be properly addressed by destination authorities,” he said. Discount airlines offer double-digit fares to different parts of Europe, making impromptu weekend trips to Barcelona, Bordeaux and more, possible.

He added that the sprawling short-term rental business, such as Airbnb, have made stays at the heart of historic cities within reach.

Overtourism has become a hot topic in European cities this summer because it’s reached a tipping point, and residents are increasingly bearing the brunt of it. This could look different depending on the destination.

For instance, more restaurants could serve international food instead of local food or there may be more souvenir stores that threaten the “authenticity” of neighborhoods, Khourouj said. Locals also face safety concerns and higher noise pollution if they live near popular areas due to overtourism.

The impact goes beyond just social factors. Parts of Europe, such as Sicily and Barcelona, have been facing water shortages amid rising temperatures, forcing them to curb visitor numbers or ration water usage. Mass tourism can also result in environmental deterioration through more waste and pollution. Amsterdam plans to ban cruises in the next few years as they drive up emissions in the city.

Unfortunately, as tourists typically make pit stops at different destinations for a few days at best, they aren’t fully aware of the impact they’re having.

“Many visitors arrive in their destinations on a package holiday or cruise. They’re somewhat insulated from the places they’re visiting and in general I’d say awareness [of their impact] is low,” Simon Lynch, the global sales and product director at tour operator Scott Dunn, told Fortune.

But it’s starting to weigh on their decisions as they consider off-season travel more or opt for off-beat locations.

To be sure, tourism has immense benefits in areas such as job creation and infrastructural improvements. In the Portuguese town of Porto, the local authorities see a trend of repeat tourists as a way to regenerate the city and revive it to new glory.

It comes down to promoting a more measured form of tourism that puts residents and the city first while still encouraging visitors.

Changing gears

Cities have started acting against mass tourism in various ways, such as banning cruises and capping crowds at popular sites. Barcelona announced a short-term rental ban in 2028 to stem its housing crisis. Venice, Athens, and Amsterdam have also grappled with overtourism and tried to counter it by introducing entry fees for attractions and capping new hotel constructions.

Bruges’s “hotel stop” model limits where hotels are constructed to promote livability in the city and its outskirts.

Spreading tourists out in different parts of a city or country can mean a more enjoyable experience for all, Ribeira said. Government policies should aim to create benefits that can translate to an “increase in the quality of life and well-being of the people who live in the destinations,” he added.

Elsewhere in Europe, authorities are trying to make tourism a positive force by encouraging visitors to help with the city’s clean-up in exchange for free access to attractions.

Scott Dunn’s Lynch pointed out that authorities should stop promoting the “Instagram hot spots” that create more chaotic city centers. London’s 90-day cap on short-term rentals in a year aims to balance tourism demand with long-term rental needs. Involving local communities in policy decisions could also help cities find a more sustainable way to manage the influx of visitors during peak seasons.

“Ultimately, it’s about creating a high-quality experience for visitors and maintaining a high-quality environment for residents,” Lynch said. “Deterring tourists isn’t the answer.”

Universa’s Mark Spitznagel, who has made billions from past crashes, sees last hurrah for stocks before severe reckoning

Talk is cheap when it comes to where stocks are headed, but investors’ ears perk up when Mark Spitznagel speaks.

One reason is that he has made some spectacular scores, including earning $1 billion in a single day, since setting up tail risk hedge fund Universa Investments in 2008. The other is that he steadfastly hasn’t relied on any sort of short-term view to do so.

The enigmatic quant, a protégé of “Black Swan” author Nassim Nicholas Taleb, loses money almost every day through a complex strategy that pays off only during very volatile periods. A few calamities—the 2008 crisis, the 2015 Flash Crash and the Covid-19 market meltdown in 2020—have been enough for a stock investor with a small allocation to his fund to trounce a classically diversified 60/40 stock and bond portfolio.

But now he sees a major selloff approaching with stocks potentially losing more than half of their value. Yet predicting even approximately when the market will crash is a lot harder than hedging a portfolio against it—many would say impossible. In the same way that so many fund managers and strategists always sound optimistic, scary talk sounds like a shrewd marketing exercise for someone insuring against tail risk.

“I think we’re on the way to something really, really bad—but of course I’d say that,” joked Spitznagel in an interview this week.

Universa’s business is hardly begging for clients these days, though, despite an unusually calm market with stocks near record highs. Spitznagel thinks the rally will continue for months and get even wilder. That is because the market is in a “Goldilocks phase” as inflation falls and Fed easing fuels bets on further gains. But rate cuts are often the starting gun for big market reversals, he says. Another contrarian sign: Some holdouts in the investing community remain cautious.

“You don’t feel like a fool for making a bearish argument,” he says.

Until recently, that is. In May, Morgan Stanley strategist Mike Wilson turned bullish shortly after losing his spot on the firm’s global investment committee. And just recently JPMorgan’s Marko Kolanovic, who stuck to his pessimistic guns through the AI rally, lost his job. Fund managers who haven’t jumped on the AI bandwagon, owning stocks like Nvidia NVDA -2.61%decrease; red down pointing triangle, are licking their wounds. These episodes have echoes of the dot-com boom: In late 1999, months before the S&P 500 peaked, Merrill Lynch’s bearish strategist Charles Clough left the firm.

Spitznagel predicts an even worse shakeout than a quarter-century ago because the excesses are more extreme—the “greatest bubble in human history.” High public indebtedness and valuations make a Washington-led rescue harder to pull off. He sees today’s benign slowdown in inflation overshooting and says the U.S. economy could enter a recession by the end of the year.

The ominous language Spitznagel uses to describe the macroeconomic situation is a “Mega-Tinderbox-Timebomb.” His analogy is subtler than it sounds: Governments have been so active tamping down any conflagration in the economy that the dry brush of debt and other hidden risks have built into the ingredients for a severe blaze.

How should mere mortals without access to tail risk hedges respond to his prediction? Probably by doing nothing, says Spitznagel.

“Cassandras make terrible investors.”

Staying passively invested in stocks is the best long-term strategy, he says. The basic purpose of the protection Universa sells is to make professional fund managers comfortable taking that risk and then to provide them with extra cash when bargains appear. Individual investors won’t have clients yank their money away in a bad year so those who can stomach steady contributions to an index fund despite scary headlines will do fine.

They should do better in the long run than wealthy investors who buy increasingly popular structured products designed to blunt market volatility. Why does he think so? One reason is that their building blocks, like put-spread collars, include the derivatives Universa buys for its fund. The long-term drag it creates on buyers’ returns represents his edge.

“We love the put-spread collar guys,” he says. “It’s never been a good trade.”

A CrowdStrike security update rendered computers unusable and underscored the fragility of modern global technology

Hemant Rathod, an Indian executive, was sipping tea in a conference room Friday morning in Delhi, about to send a long email to his team, when his computer went haywire.

The HP laptop suddenly said it needed to restart. Then the screen turned blue. He tried in vain to reboot. Within 10 minutes, the screens of three other colleagues in the room turned blue too.

“I had taken so much time to draft that email,” Rathod, a senior vice president at Pidilite Industries 500331 -1.92%decrease; red down pointing triangle, a construction-materials company, said by phone half a day later, still carrying his dead laptop with him. “I really hope it’s still there so I don’t have to write it again.”

The outage, one of the most momentous in recent memory, crippled computers worldwide and drove home the brittleness of the interlaced global software systems that we rely on.

Triggered by an errant software update from the cybersecurity company CrowdStrike CRWD -11.10%decrease; red down pointing triangle, the disruption spread as most people on the U.S. East Coast were asleep and those in Asia were starting their days.

Over the course of less than 80 minutes before CrowdStrike stopped it, the update sailed into Microsoft Windows-based computers worldwide, turning corporate laptops into unusable bricks and paralyzing operations at restaurants, media companies and other businesses. U.S. 911 call centers were disrupted, Amazon.com employees’ corporate email system went on the fritz, and tens of thousands of global flights were delayed or canceled.

“In my 30-year technical career, this is by far the biggest impact I’ve ever seen,” said B.J. Moore, chief information officer for the Renton, Wash.-based healthcare system Providence, whose hospitals struggled to access patient records, perform surgeries and conduct CT scans.

Fixing the problem involved technical steps that confounded many users who aren’t tech-savvy. Some corporate IT departments were still working to unfreeze computer systems late on Friday. CrowdStrike said the outage wasn’t a cyberattack.

Adding to the chaos—and further underlining the vulnerability of the global IT system—a separate problem hit Microsoft’s Azure cloud computing system on Thursday shortly before the CrowdStrike glitch, causing an outage for customers including some U.S. airlines and users of Xbox and Microsoft 365.

The CrowdStrike problem laid bare the risks of a world in which IT systems are increasingly intertwined and dependent on myriad software companies—many not household names. That can cause huge problems when their technology malfunctions or is compromised. The software operates on our laptops and within corporate IT setups, where, unknown to most users, they are automatically updated for enhancements or new security protections.

In a 2020 hack, Russian perpetrators inserted malicious code into updates of SolarWinds software in a way that compromised a swath of the U.S. government and scores of private companies.

The rising frequency and impact of cyberattacks, including ones that insert damaging ransomware and spyware, have helped fuel the growth of CrowdStrike and such competitors as Palo Alto Networks and SentinelOne in recent years. CrowdStrike’s annual revenue has grown 12-fold over the past five years to over $3 billion.

But cybersecurity software such as CrowdStrike’s can be especially disruptive when things go wrong because it must have deep access into computer systems to rebuff malicious attacks.

Not all updates happen automatically, and computer attacks often occur because people or businesses are slow to adopt patches sent by software companies to fix vulnerabilities—in essence, failing to take the medicine the doctors prescribe. In this case, the medicine itself hurt the patients.

The global outage began with an update of a “channel file,” a file containing data that helps CrowdStrike’s software neutralize cyber threats, CrowdStrike said. The update was timestamped 4:09 a.m. UTC—just after midnight in New York and around 9:30 a.m. in India.

That update caused CrowdStrike’s software to crash the brains of the Windows operating system, known as the kernel. Restarting the computer simply caused it to crash again, meaning that many users had to surgically remove the offending file from each affected computer.

The nature of the patch meant that the impact was uneven, with people in the same office even experiencing the outage very differently. Apple Macs, which don’t use the affected Windows software, were OK, and servers and PCs that weren’t on and internet-connected didn’t receive the toxic update.

CrowdStrike soon realized something was amiss and the update to the file was rolled back 78 minutes later. That meant it wouldn’t affect computers that were off or in sleep mode during that period. But for many of those that were switched on, the damage was done.

In a blog post, CrowdStrike told those users to boot into the Windows “safe mode,” delete the offending file—called C-00000291*.sys—and reboot.

IT teams often can fix problems on employees’ computers using remote-access software—tools that became especially common during the work-from-home boom of the pandemic. But for laptops and other PCs that approach doesn’t work if the machines can’t restart. For those systems, CrowdStrike’s fix had to be done in person—either by a tech-support person on site, or by a regular employee trying to apply the instructions.

Moore, the Washington state healthcare CIO, was away on vacation and initially wasn’t worried when emails about malfunctioning computer applications started landing in his inbox Thursday night.

But by 11 p.m. Pacific time, he had learned that the outage had engulfed the nonprofit health system’s approximately 50 hospitals and 1,000 clinics across seven states. Hundreds of IT employees began deploying patches, which required manual remediation, he said.

Some of the system’s affected computers and devices were fixed by 6 a.m., and most were humming again by 10 a.m. “It will be the end of the day before we get it all done,” Moore said Friday morning.

As companies were grappling with the impact, CrowdStrike’s co-founder and chief executive officer, George Kurtz, was on TV trying to reassure customers—and shareholders—looking haggard after a long night.

“We identified this very quickly and rolled back this particular content file,” Kurtz said in a CNBC interview about nine hours after the faulty update. “Some systems may not fully recover, and we’re working individually with each and every customer to make sure that we can get them up and running and operational,” he added.

The time frame for the recovery could be hours or “a bit longer,” he said. Kurtz said on X that the outage wasn’t “a security incident or cyberattack.”

Microsoft CEO Satya Nadella took to X to offer his own reassurance that the company was working closely with CrowdStrike to bring systems back online. Tesla CEO Elon Musk responded, “This gave a seizure to the automotive supply chain,” and later said, “We just deleted CrowdStrike from all our systems.”

In the U.S., air travel chaos spilled into a second day Saturday as some airlines struggled to get operations back on track, while others started to return to normal. Over 1,200 U.S. flights had been scrapped as of midday Saturday in addition to the 3,400 that were canceled Friday according to FlightAware, a flight tracking site.

Delta Air Lines has been the hardest hit, scrubbing over a third of its flights Friday with mounting cancellations Saturday. Delta executives wrote in an internal memo Friday that a significant number of the airline’s operating applications run on Windows. Most of those had been restored, but a crew tracking-related tool was taking longer to process the high volume of changes. The carrier told pilots in a separate Saturday update that a large volume of open trips needed crews and the airline was working to prevent planes from backing up on the ground at its Atlanta hub.

For Rathod, the senior vice president at Pidilite, the travails didn’t end with his potentially lost email. After switching to his iPad to keep working, he had to rush to the airport for a flight—only to find long lines and flummoxed security staff checking boarding passes manually. Flight information screens weren’t working, so he had to find airline staff to direct him to the right gate.

“It was a mess at Delhi airport,” Rathod said. “How can we depend so much on one company?”

Wave of shipping inflation could complicate rate cuts, economists warn

Rise in freight costs could drive up the price of goods, slowing progress on disinflation

Investors are underestimating the risk that surging shipping costs will push up inflation and slow the pace of interest rate cuts by the European Central Bank and Bank of England, economists have warned.

The cost of moving a 40ft container between Asia and northern Europe at short notice has more than doubled since April from $3,223 to $8,461, according to shipping data specialists Xeneta, following an intensification of Houthi rebel attacks on ships travelling through the Red Sea to the Suez Canal.

When freight prices began to rise in December, policymakers were sanguine that it would not drive up the prices of consumer goods as a much bigger spike did after the pandemic.

But Christine Lagarde, the European Central Bank president, this week flagged heightened geopolitical tensions as an upside risk to inflation as they could “push energy prices and freight costs higher in the near term”.

Some economists are now sounding the alarm too.

Researchers at the investment bank Nomura see little immediate prospect of shipping costs easing, given ongoing tensions in the Red Sea, potential strikes at US and German ports, low water levels in the Panama Canal and an earlier than usual rush to build inventories ahead of the holiday season.

Andrzej Szczepaniak, economist at Nomura, argued that there was now more potential for companies to pass these costs on as a consumer-led recovery gathered strength in the eurozone and UK.

“Real wages are improving, headline inflation is coming down, there will be stronger consumption going forward and an acceleration in growth,” he said, estimating that shipping costs could add 0.3 to 0.4 percentage points to UK and eurozone inflation by the end of 2025, even if they plateaued at current levels and then gradually fell.

Brian Coulton, chief economist at Fitch Ratings, expects a similar effect and thinks investors are not paying enough attention to the risk that central banks will have to delay rate cuts to cover the difficult “last mile” in bringing inflation back to target.

“In the last year, [the narrative] has all been about the stickiness of services inflation,” he said. “There has been quite a lot of comfort taken by market participants from the stabilisation in core goods prices . . . I think this is quite an important fly in the ointment on that narrative.”

Some economists do not share this view — or at least, not yet.

Holger Schmieding, economist at Berenberg, said shipping costs were “a modest irritant rather than a worry” and would raise inflation by only 0.1-0.2 percentage points, as manufacturers were not well placed to pass costs on.

Simon Macadam, at the consultancy Capital Economics, also said any inflationary effect from shipping costs would be “small beer” compared with the much bigger challenge posed by sticky services prices.

The spike in freight rates on outbound routes from China was “not representative” of overall global shipping costs, Macadam said, and shipping costs represented only a small fraction of the value of goods. Even if manufacturers had as much pricing power as in the “perfect conditions” of 2021 and 2022, they would pass only half the increase on to consumers, raising inflation by 0.2 percentage points at most.

Meanwhile Claus Vistesen, at the consultancy Pantheon Macroeconomics, said there was no doubt that if sustained, higher shipping costs would “show up in consumer prices at some point” — but only after warning signals in surveys and factory gate prices. “They are not going to come like a thief in the night.”

But Simon French, chief economist at the investment bank Panmure Liberum, said even a relatively small pick-up in goods prices could be a worry for central banks and a potential brake on monetary easing.

“Central banks have set out an easing path . . . that is predicated on benign goods inflation,” he said. “Shipping rates at current levels could derail that . . . The market hasn’t absorbed that yet.”

Azerbaijan hits out at EU for failing to agree long-term gas deals

Short-term contracts leave Baku unable to raise investment needed to meet demand from bloc, says Azeri envoy

Azerbaijan has accused the EU of treating the country as a “firefighter” by only committing to short-term gas deals despite asking the country to boost exports of the fuel to the bloc.

Baku needed the certainty of long-term contracts in order to raise the finance required to increase gas production in the Caspian Sea and meet the additional EU demand, Vaqif Sadiqov, Azerbaijan’s ambassador to the EU, told the Financial Times.

“We cannot be a firefighter just sending gas for three to six months,” Sadiqov said. “We need the contracts so that we can go to banks for financing for drilling deep into the Caspian Sea.”

In 2022 Brussels and Baku struck a deal to increase Azerbaijan’s annual gas exports to the EU to 20bn cubic metres by 2027, compared with 11.8 bcm last year, as the bloc tried to wean itself off Russian gas after its invasion of Ukraine.

Despite “deep discussions” with the European Commission about how to meet the target, Sadiqov said EU operators were reluctant to sign long contracts because of the bloc’s ambition to curb its consumption of fossil fuels and reach net zero greenhouse gas emissions by 2050.

EU officials have said it is up to companies rather than national governments to make the commercial agreements.

Finding new sources of natural gas has become critical for the EU since Russia, previously the bloc’s largest supplier, began to incrementally shut off gas flows in retaliation for the EU’s support for Ukraine.

But the bloc has also committed to ambitious climate goals. In a recommendation presented in February for the EU to cut greenhouse gas emissions by 90 per cent by 2040, Brussels said fossil fuel consumption in 2040 should be 80 per cent less than in 2021, of which only 40 per cent would be gas. Gas is made up mainly of methane, a potent warming molecule which holds more heat than carbon dioxide but is shorter-lived.

Azerbaijan, which relies heavily on oil and gas revenues, is due to host the UN’s annual COP climate summit in November this year. Some diplomats and negotiators have privately expressed concern that the country was reluctant to address the question of how to shift away from fossil fuels.

Matthew Bryza, managing director at US consultancy Straife and a former US ambassador to Azerbaijan, said that to reach the EU’s 2027 target for Azeri gas imports, it was imperative to finance upstream production because Azerbaijan would not otherwise have sufficient extra gas production to meet the goal.

“To finance that, there needs to be surety that there are [customers] in Europe into the future, and there is a hesitancy on the EU side to support any long-term gas sales and purchase agreements,” he said.

Between January and June, Azerbaijan exported 6.4 bcm of gas to EU countries, about a quarter of its total production, according to Azeri government figures. Over the past three years Azerbaijan has increased its gas flows to the EU by 12 per cent.

At a summit of European leaders last week, Azerbaijan’s President Ilham Aliyev said exports to the EU would hit 13 bcm this year. He has previously called the country’s fossil fuel reserves “a gift from the gods”.

To meet the 2027 goal, pipelines in the Southern Gas Corridor (SGC) between Azerbaijan and Europe would also need to be expanded.

Brussels is unable to finance the project because of changes to its rules in 2021 that prevent the EU budget being spent on fossil fuel infrastructure. The European Investment Bank has similar restrictions.

“We offer a market that is very interesting to Azerbaijan but we cannot finance it,” an EU official said.

Sergiy Makogun, former chief executive of Ukraine’s state-owned gas transmission network, said the Caspian region could provide large volumes of gas to Europe. If the EU helped facilitate investment, he said, it would “significantly increase flexibility” of gas supplies for the EU.

He added that the shareholders in Tanap, a pipeline through Turkey that forms part of the SGC, “do not want to invest to expand capacity because they fear no one will use it”.

The Southern Gas Corridor company is working on an investment plan with potential backing from the European Bank for Reconstruction and Development. But the EBRD has said that to finance the project, it must align with the aims of the 2015 Paris climate accord.

Azerbaijan’s state-owned energy company Socar said it was involved in “multiple discussions” with Brussels and EU countries to increase gas supplies from 2025.

The European Commission declined to comment.

Supply chain disruptions and labour shortages continue to hamper production

Aircraft delivery delays by Airbus and Boeing are forcing airlines to fly older, less fuel-efficient planes for longer, slowing the industry’s progress on curbing harmful carbon emissions. 

Increased fuel efficiency from new aircraft is among the measures being pursued by the aviation industry as it seeks to meet its pledge to reach net zero by 2050. But more than two years since the return of air travel following the Covid-19 pandemic, supply chain disruptions and labour shortages continue to hamper production of planes. 

With both Airbus and Boeing expected to announce a flurry of new airline orders at this week’s Farnborough air show, concerns are rising that the gap between demand and supply could slow the industry’s progress on reducing emissions through to the end of the decade. 

“The cumulative deficit of deliveries is going to stay through to 2028 at least,” said Rob Morris, head of Cirium’s consultancy business Ascend. 

This “does mean that airlines are keeping planes flying for longer, with mid-life and older aircraft [staying] in service”, he added.

Flying accounts for about 2 per cent of global energy-related emissions. Air traffic has returned close to pre-pandemic levels by the end of last year. The industry believes it can reach net zero by 2050 while still growing, and has outlined a range of measures to cut its net emissions, including switching to sustainable aviation fuel, newer aircraft and carbon offsets.

Under the European industry’s net zero road map, new but still conventionally powered aircraft are responsible for nearly a fifth of the sector’s emissions reductions by 2050. Planes with new generation engines, such as the A320neo, burn about 15 per cent less fuel and emit 15 per cent less carbon dioxide than the prior generation of aircraft. 

Even when there is a “significant delay of new deliveries, airlines’ growth plans don’t change”, said Nikhil Sachdeva, global lead for sustainable aviation at consultants Roland Berger. Instead, airlines end up with a “double whammy of delayed retirements and older leased aircraft” as they try to keep their growth commitments, he added. 

Both Airbus and Boeing will deliver fewer aircraft than originally planned this year. The European plane maker said last month it would deliver “around 770” commercial aircraft this year, down from a previous target of 800. 

Boeing’s production of its 737 Max aircraft has been capped at no more than 38 per month by US aviation regulators as the company grapples with manufacturing and quality issues following the mid-air blowout of a section of one of its aircraft in January. The US plane maker delivered 44 commercial aircraft in June — a 27 per cent drop from a year ago.

Cirium’s Morris said the biggest delivery deficit will come next year; the consultancy has revised its previous forecast that 32 per cent of all narrow-body aircraft in service will be powered by new-generation engines down to 27 per cent. 

This would have “a negative impact on fleet efficiency in CO₂ and economic terms”, he said, but added that by 2030, the delivery deficit would disappear and 55 per cent of the global narrow-body fleet will be new generation planes. 

Airline executives are frustrated by the widespread delivery delays, but believe it is too early to determine at what stage the lack of new aircraft will begin to materially knock the net zero road map off course. “It is certainly a risk if there is a major and persistent blockage in deliveries,” one said. 

Some industry experts, however, play down the impact more fuel efficient aircraft will have on the industry’s emissions in the longer term. Sash Tusa, analyst at Agency Partners, pointed out the industry’s projected average traffic growth of more than 3 per cent a year and the associated rise in emissions would exceed any emission savings from more fuel-efficient aircraft.

In the long term, aviation’s big bet to reduce emissions remains sustainable aviation fuel (SAF). Made from a range of non-fossil fuel sources, including waste cooking oil and crops, SAF can emit 70 per cent less CO₂ than conventional jet fuel.

Critics of SAF question the fuel as a viable option for the industry in reducing emissions. Very little of it is produced, and it costs far more than standard fuel. The usage of crops and land have been deemed unsustainable by some environmentalists, while others point out the fuel continues to generate greenhouse gas emissions during combustion.

Nevertheless, executives see SAF as the main measure of reducing carbon emissions. “The only way to decarbonise aviation really is SAF,” Scott Kirby, chief executive of United Airlines, told analysts last week. He added: “Really getting a sustainable and viable SAF industry is how you ultimately get to 100 per cent, which is our goal.” 

Taiwan’s military drills turn serious as China threat escalates

Annual Han Kuang exercise pivots from scripted performances to realistic battlefield scenarios

Taiwan’s armed forces will use combat exercises next week to rigorously test its warfighting capabilities for the first time, in a radical departure from decades of scripted performances as the military steels itself against the growing threat from China.

“This time, we are exercising the ability of small units to operate in the event that they are cut off from more senior command,” said a top military official, introducing the annual Han Kuang exercise. “The focus is on how to adapt, how to decide what to do, under what circumstances to engage the enemy.”

While these are standard goals for most modern militaries, the five-day drill, which kicks off on Monday, will mark a revolutionary change for the force, defence officials and analysts said.

Founded 100 years ago as the army of the Kuomintang party, the Republic of China’s armed forces, as Taiwan’s military is known, have struggled to shake off their rigid, bureaucratic culture.

“This is the first time they’re actually taking their job seriously,” said Kitsch Liao, an assistant director at the Atlantic Council’s Global China Hub and an expert on the Taiwanese military. “They feel like the situation is tense enough and are not just going through the motions like Han Kuang used to in the past.”

The drill comes amid growing tension with China, which claims Taiwan as part of its territory and threatens to attack it if Taipei resists unification indefinitely. The People’s Liberation Army is increasing operations near the island, including flying a record number of aircraft close to Taiwan this month.

Since its first iteration in 1984, Han Kuang has been the culmination of Taiwan’s annual military training cycle. With tabletop exercises and computer simulations for commanders earlier in the year, July has traditionally been reserved for a week of spectacular shows.

In the past, these have included beachfront live-fire simulations of repelling Chinese amphibious invaders. The exercises are watched by the president, other senior politicians and foreign diplomats on canopied tribunes and are broadcast live on television. To ensure a smooth performance, troops train for weeks, and soldiers are disciplined for slip-ups.

None of that will happen this year. “We are not having rehearsals beforehand, nor will there be punishment for soldiers afterwards,” said the senior military official.

Admiral Mei Chia-shu, chief of the general staff, told lawmakers last month that this year’s drill would not include a simulated enemy force because it was more important for Taiwan’s paratroopers and amphibious forces — who played Chinese invaders in the past — to train for their own crucial role in defending the country.

Mei said units would be given instructions for realistic battlefield tasks on short notice, and no live munitions would be used in Taiwan proper, as the large amount of unscripted movements would make that too dangerous.

Experts were encouraged by the revisions. “These changes begin to address the Taiwan military’s core problem, which is operational-level and tactical-level decision-making,” said Ivan Kanapathy, a former US Marine who served as director for China, Taiwan and Mongolia in Donald Trump’s National Security Council.

“Their structure is very hierarchical, almost Soviet-style. The decision [of] which hill to take was made at the colonel level instead of lower-level people evaluating the situation in real time,” said Kanapathy, who advised on military and security affairs at the American Institute in Taiwan, Washington’s quasi-embassy, 10 years ago. “Presenting them with unique problems they have not seen yet is what has been lacking for years.”

A former top general said Mei’s focus on practising decentralised command indicated the military leadership was finally embracing asymmetric warfare, a strategy that exploits a superior enemy’s weaknesses by dispersing and using small, cheap, mobile weapons instead of trying to match its strength with aircraft and big ships.

The US has pushed Taiwan to adopt asymmetry for years, but efforts to do so, spearheaded by Taiwan’s former chief of the general staff, Admiral Lee Hsi-min, were abandoned after his retirement in 2019.

Analysts said the decisive factor behind the current shift was Wellington Koo, Taiwan’s first civilian defence minister since the early 1990s save brief interludes in 2008 and 2013. Koo, a former lawyer, led the National Security Council under Lai’s predecessor Tsai Ing-wen and had closely engaged with military brass and mid-level officers.

In the two months since taking over the defence ministry, Koo has kicked off reforms aimed at reducing ceremonial and bureaucratic processes and freeing up commanders to determine strategy and training.

The space Mei has been given under Koo “is what Lee Hsi-min never had”, Kanapathy said. “He was very constrained in what he could implement in training.”

Observers also see the impact of enhanced military exchanges with the US in this year’s exercise. As more members of the US National Guard, Marines and US Army’s Security Forces Assistance Brigades have come to Taiwan to train troops and stayed for longer, they have developed a more realistic picture of the Taiwanese military’s weaknesses, said people familiar with the exchanges.

The biggest problem was the general staff’s planning process, the people said. “They have one war plan which has remained more or less unchanged for a long time, and they just assign a few people to make some quick tweaks for specific tasks,” said one person involved in the exchanges.

“That’s not how this works. They need to learn to adapt operational plans to a changing situation in wartime in rapid, live planning cycles. This exercise starts addressing that.”

Still, analysts cautioned that this year’s Han Kuang was only the first step. “People don’t realise the stage of infancy the military is in,” said Liao of the Atlantic Council. “They have to start training them to do very basic things.”